European Union (EU) countries have reached an agreement on the Carbon Border Adjustment Mechanism (CBAM) regulation, targeting imports of carbon-intensive products, namely cement, aluminium, fertilisers, power generation, iron and steel. The main objective of this measure is to prevent offsetting the EU’s greenhouse gas (GHG) emissions reduction efforts through imports of products manufactured in non-EU countries, where climate change policies are less ambitious than in the European Union.
The CBAM will function in parallel with the EU’s Emissions Trading System (EU ETS), to mirror and complement its functioning on imported goods, gradually replacing existing EU mechanisms to address the risk of carbon leakage, in particular the free allocation of EU ETS allowances. A three-year transition phase for the levy would start in 2023. The CBAM is part of a package of EU climate change policies designed to cut the EU net GHG emissions by 55% by 2030 from 1990 levels.
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